How to become a successful investor? Achieving success as an investor is not an easy task. You need to have a very close eye on the market, and understand how it works. As an investor, you would be required to take risks since the movement of the stock market is very random, or at least appears to be. The ups and downs, however, have some cause and effect to it. But only an experienced investor with a good understanding of the workings of the stock market can predict things accurately. Even so, many are caught out due to the unexpected nature of the market. This is why a good investor must be cautious and quit when the going is good.
Despite these problems, a successful investor can make good money playing the markets. One factor for this is the concept of compound interest. Warren Buffett, one of the richest men in the world, offers advice on stock investing. In his will, he has provided for his estate to be invested in equities and bonds in a 90 to 10 ratio, which he believes would offer high returns. This might not be possible for the average investor, for whom a 50 – 50 mix would be more suitable.
Buffet advises that to make money from investing, one must be aware of the charges and avoid unnecessary fees and penalties. At the same time, passive investing must also be avoided. He also claims that diversification is of utmost importance. And indeed, this is the case, especially if you want to reduce your risks and maximize your profits. It is a basic tenet of investing that your portfolio should contain different investments so even if one fails, you would not immediately go bankrupt. The SPDR S&P 500 ETF Trust is a good choice for equity investment as it offers 80% coverage of market capitalization and offers a growth rate of 11.6%. Other equity investments that could be considered are the Vanguard 500 Index Fund, the iShares Russell 2000 Index, and the PowerShares QQQ Trust, Series 1. Our final recommendation is SPDR Dow Jones Industrial Average ETF.
In addition to these equities, Buffett also recommended purchasing short-term government bonds. One good recommendation is iShares Barclays 1-3 Year Treasury Bond Fd. Bond investments will not create wealth but will preserve wealth while taking inflation into consideration. With the right balance of equity and bond, and investing in a diversified range of ETFs, you can indeed address the question of how to become a successful investor!
